Tax preparation software today typically obtains tax data for completing a tax return by conducting a screening interview and questioning a taxpayer or other user of the software about the type of tax data relevant to the taxpayer's situation. Standard screening questions may relate to the taxpayer's income, deductions, credits, etc. The responses to the standard screening questions allow the software to determine what specific data will be needed for completion the tax return and therefore, what additional data prompts are necessary to complete the tax data gathering process. Each response to a screening question regarding the type of tax data the taxpayer has determines the subsequent data prompts that are posed to the user so that the appropriate tax data is collected for preparation of the tax return.
There are disadvantages to using a standard screening interview in tax preparation software. The user may be required to answer many questions about what tax data the taxpayer has or does not have so that additional data prompts related to the actual amounts are propagated. In many instances, the software poses screening questions that are not appropriate for the taxpayer's situation but are nonetheless required for the software to determine which subsequent data prompts to present. For example, the user may be asked whether the taxpayer has miscellaneous income from a Form 1099-MISC or real estate proceeds from a Form 1099-S. Many taxpayers do not have such income or proceeds. However, in order to prepare an appropriate tax return, the tax preparation software must confirm that the taxpayer does not have such income to report.
The process of providing tax data for do-it-yourself tax software or other tax preparation software is cumbersome because users are required to complete a lengthy screening interview that often requires the user to confirm that the taxpayer does or does not have certain tax data or that certain tax situations do or do not apply to the taxpayer. The tax return cannot be prepared unless the tax data appropriate for the taxpayer's specific situation is collected and communicated to the software. Because screening questions are used to determine what data to collect, the only way to ensure that the appropriate data is actually collected is to question the user on every possible source of income, deduction, credit, etc. for the taxpayer. Through the use of screening questions, the tax software is able to determine what information and data is appropriate for the taxpayer's situation. However, the screening process is time consuming and is especially ineffective for taxpayers that have only a few sources of income and a few applicable deductions or credits. Therefore, there is a need for a tax preparation system and method that reduces the number of screening questions that a user must answer and that results in a customized tax preparation process according to taxpayer's situation.